Assessment of the country’s economic situation by the Reserve Bank of India

February 9, 2026

Abhishek Vij

The Reserve Bank of India announces the country’s monetary policy every two months. Along with the announcement of the new monetary policy, the Reserve Bank presented its assessment for the current financial year 2025-26. The country’s monetary policy has been announced based on the status quo. The most important is the repo rate.

The Reserve Bank has kept the repo rate at 5.25 percent. Remember, since February 2025, the repo rate has been reduced by 1.25 percent. The previous monetary policy reduction aimed to provide banks with sufficient liquidity so that the Reserve Bank could entice investors by making its loans cheaper and thus boost the country’s growth rate. It should be noted that over the past year, the Reserve Bank has maintained that India has brought inflation under control. The challenge now is to revive stalled economic growth.

However, the Reserve Bank has stated that it will have two objectives. First, controlling inflation and second, increasing the growth rate. Since the repo rate has been kept stable at 5.25 percent in this monetary policy, it means that neither loans will become cheaper nor will there be any change in EMIs. It is believed that inflation has moderated in the country. Economic estimates indicate that India’s growth rate is currently among the highest in the world.

Furthermore, due to the India-US trade deal and the trade agreement with the European Union, the Reserve Bank believes that the environment for investment has become favorable due to the reduction in US tariff rates. Therefore, there is no need to reduce the repo rate to provide more liquidity in the market. The RBI says that it will adjust its policy based on the economic situation, so the repo rate has not been reduced further for now. Additionally, the economic growth forecast for the first half of 2026-27 has been lowered to 6.95 percent. The Reserve Bank estimates that we will achieve GDP growth of 7.4 percent instead of 7.3 percent.

Additionally, the Reserve Bank has announced that if cybercriminals fraudulently obtain someone’s OTP and commit fraud, the Reserve Bank will compensate the victim up to Rs25,000. Now, let’s turn to a realistic assessment of the economic situation. The Reserve Bank announced inflation control and investment incentives, but did not change interest rates. But isn’t this announcement premature? Inflation still hasn’t been fully controlled. Furthermore, as experts say, if the inflation index is changed and includes capital formation and agricultural production, the results will not be as encouraging.

Therefore, the declaration that the country has controlled inflation and there is no point in keeping rates high does not seem very realistic. Inflation has recently spiked, and what guarantees are there that inflation will not spiral out of control in the future? Monetary policy is the guardian of the country’s economy.

No decision by it should be taken in haste. If interest rates are made immutable, won’t savings, the basis of Indian investment, suffer a slight setback? It’s true that India has successfully negotiated two major trade agreements (with the US and the European Union) through diplomatic success, but the real results will only emerge in a few months. Policymakers must remain vigilant in addressing the need to simultaneously address inflation and growth.